SOURCE: Net 1 UEPS Technologies, Inc.

Net 1 UEPS Technologies, Inc.

February 04, 2016 16:05 ET

Net 1 UEPS Technologies, Inc. Reports Second Quarter 2016 Results

JOHANNESBURG, SOUTH AFRICA--(Marketwired - February 04, 2016) - Net 1 UEPS Technologies, Inc. (NASDAQ: UEPS)(JSE: NT1) today released results for the second quarter of fiscal 2016.

  • Q2 2016 Revenue of $150.3 million, a constant currency increase of 23%;
  • Q2 2016 FEPS of $0.42, which includes an adverse impact of $0.09 per share attributable to taxes, and incremental expenses to expand operations and infrastructure;
  • Net loan book increased 40% from Q1 2016, and more than 800,000 EPE accounts opened, 800 ATMs deployed and 110 branches opened by January 2016;
  • Repurchase of 749,213 shares of Net1 common stock for approximately $11.2 million.

Summary Financial Metrics

     
    Three months ended December 31,
    2015   2014   % change in USD   % change in ZAR
(All figures in USD '000s except per share data)            
Revenue   150,281   154,131   (2%)   23%
                 
GAAP net income   16,658   22,374   (26%)   (6%)
                 
Fundamental net income (1)   19,619   26,400   (26%)   (6%)
                 
GAAP earnings per share ($)   0.35   0.48   (26%)   (7%)
                 
Fundamental earnings per share ($) (1)   0.42   0.57   (26%)   (8%)
                 
Fully-diluted shares outstanding ('000's)   47,400   46,644   2%    
                 
Average period USD/ ZAR exchange rate   14.12   11.22   26%    
                 
    Six months ended December 31,
    2015   2014   % change in USD   % change in ZAR
(All figures in USD '000s except per share data)            
Revenue   304,754   310,572   (2%)   21%
                 
GAAP net income   39,678   46,463   (15%)   5%
                 
Fundamental net income (1)   46,031   54,522   (16%)   4%
                 
GAAP earnings per share ($)   0.84   0.99   (15%)   5%
                 
Fundamental earnings per share ($) (1)   0.98   1.16   (16%)   4%
                 
Fully-diluted shares outstanding ('000's)   47,394   46,990   1%   1%
                 
Average period USD/ ZAR exchange rate   13.49   10.97   23%    
                 

(1) Fundamental net income and earnings per share are non-GAAP measures and are described below under "Use of Non-GAAP Measures -- Fundamental net income and fundamental earnings per share." See Attachment B for a reconciliation of GAAP net income to fundamental net income and earnings per share.

Factors impacting comparability of our Q2 2016 and Q2 2015 results

  • Unfavorable impact from the strengthening of the U.S. dollar against primary functional currencies: The U.S. dollar appreciated by 26% against the ZAR and 10% against the KRW during Q2 2016, which negatively impacted our reported results;
  • Continued growth in financial inclusion services: We continued to grow our financial inclusion services offerings during Q2 2016, which has resulted in higher revenues and operating income, primarily from more sales of low-margin prepaid airtime and an increase in transaction fees. The significant growth in our lending book during December 2015 resulted in a substantial increase in the allowance for doubtful finance loans receivable, in accordance with our policy of providing for doubtful finance loans receivable at the time that a loan is originated;
  • Ongoing contributions from EPE and Smart Life and expansion of branch network: Our EPE and Smart Life offerings contributed to an increase in revenue in ZAR, as well as an associated increase in establishment costs for our branch network;
  • Increased contribution by KSNET: Our results were positively impacted by growth in our Korean operations; and
  • Tax impact of dividends from South African subsidiary: Our income tax expense includes approximately $2.4 million related to the tax impact, including withholding taxes, resulting from distributions from our South African subsidiary during October 2015, which helped reduce the impact of a weakened ZAR on our reported cash balances. The conversion of a significant portion of our ZAR cash reserves to USD negatively impacted our interest income due the material difference between ZAR and USD deposit rates.

Comments and Outlook

"We continue to see tangible gains in the execution of our strategic plan, which includes the scaling up of our newer growth initiatives and the globalization of our business activities," said Dr. Serge Belamant, Chairman and CEO of Net1. "EasyPay Everywhere, financial services and ZAZOO all delivered in-line or above our expectations, supported by consistent operating contributions from our established and recurring mature businesses, despite the ongoing currency and macroeconomic headwinds. Our pipeline of local and international opportunities for both our card-centric and mobile-centric projects augurs well for the sustained organic growth of our business," he concluded.

"Our underlying business fundamentals and momentum remain strong," said Herman Kotze, Chief Financial Officer of Net1. "We converted a meaningful portion of our South African cash reserves to USD in order to limit the impact of the sudden and volatile depreciation of the ZAR during Q2 2016. This resulted in withholding and other tax-related adjustments, as well as lower tax-effected interest income due to the differential between ZAR and USD deposit rates, of approximately $0.06 to our basic and diluted EPS. Additionally, the 40% sequential growth in our lending book during Q2 2016, adversely impacted EPS by $0.02 per share as a result our provisioning policy to provide an allowance on loan origination. We will only recognize the revenue from these new loans from Q3 2016. Finally, EPS was $0.01 per share lower due to the ongoing incremental costs incurred to expand our branch network," he added.

"Therefore for fiscal 2016, we now expect fundamental earnings per share of at least $2.45, which includes a full year impact of $0.12 per share related to taxes and forgone interest income as a result of the distribution of our South African cash reserves to our U.S. parent. Our fiscal 2016 guidance once again also assumes a constant currency base of ZAR11.43/$1 and a share count of 46.7 million shares," he concluded.

Share buybacks and replenishment of repurchase authorization back to $100 million

During Q2 2016, we acquired 749,213 shares of Net1 common stock for approximately $11.2 million. On February 3, 2016, our Board of Directors replenished the authorization to repurchase back to up to $100 million of common stock. The authorization does not have an expiration date. The share repurchase authorization will be used at management's discretion, subject to limitations imposed by SEC Rule 10b-18 and other legal requirements and subject to price and other internal limitations established by our Board of Directors. Repurchases will be funded from our available cash reserves. Share repurchases may be made through open market purchases, privately negotiated transactions, or both. There can be no assurance that we will purchase any shares or any particular number of shares. The authorization may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, liquidity and other factors that management deems appropriate.

Results of Operations by Segment and Liquidity

Our operating metrics will be updated and posted on our website (www.net1.com).

South African transaction processing

Segment revenue was $52.8 million in Q2 2016, down 10% compared with Q2 2015 in USD, but 14% higher on a constant currency basis. In ZAR, the increase in segment revenue and operating income was due to higher EPE revenue as a result of increased ATM transactions, more low-margin transaction fees generated from card holders using the South African National Payment System and an increase in the number of social welfare grants distributed, offset by fewer inter-segment transaction processing activities. Our operating income margin for Q2 2016 and 2015 was 23% and 22%, respectively, and was higher primarily due to higher EPE revenue as a result of increased ATM transactions, an increase in the number of beneficiaries paid in fiscal 2016 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System, partially offset by annual salary increases granted to our South African employees.

International transaction processing

Segment revenue was $40.8 million in Q2 2016, up 1% compared with Q2 2015 in USD, and up 27% on a constant currency basis. Operating income during Q2 2016 was lower due to an increase in depreciation expenses at KSNET and ongoing ZAZOO start-up costs in the UK and India, but was partially offset by increase in revenue contribution from KSNET and a positive contribution by XeoHealth. Operating income and margin for Q2 fiscal 2015, was negatively impacted by ad hoc incentives provided to staff due to the strong operating performance of KSNET during calendar 2014. Operating income margin for Q2 fiscal 2016 and 2015 was 10% and 14%, respectively.

Financial inclusion and applied technologies

Segment revenue was $65.7 million in Q2 2016, down 3% compared with Q2 2015 in USD and up 22% on a constant currency basis. Financial inclusion and applied technologies revenue and operating income increased primarily due to higher prepaid airtime and other value-added services sales, more ad hoc terminal and card sales and, in ZAR, an increase in inter-segment revenues, offset by lower lending service fees. Operating income for the second quarter of fiscal 2016, was adversely impacted by an increase in our allowance for doubtful finance loans receivable resulting from a commensurate increase in our lending book in the last lending cycle of calendar 2015 and establishment costs for Smart Life and expansion of our branch network.

Driven by our expanded branch and ATM infrastructure, we experienced an increase in our lending book towards the end of Q2 2016. We expect this growth in our lending book to translate to higher revenue and operating income during the third quarter of fiscal 2016.

Operating income margin for the Financial inclusion and applied technologies segment was 21% and 26%, respectively, during Q2 2016 and 2015, and has decreased primarily due to the increase in our allowance for doubtful finance loans receivable, the sale of more low-margin prepaid airtime and establishment costs for Smart Life, expansion of our branch network and annual salary increases for our South African employees.

Corporate/eliminations

In USD, our corporate expenses have decreased primarily due to the impact of the stronger USD on goods and services procured in other currencies, primarily the ZAR, and lower amortization costs, partially offset by modest increases in USD denominated goods and services purchased from third parties and directors' fees.

Cash flow and liquidity

At December 31, 2015, we had cash and cash equivalents of $101.4 million, down from $117.6 million at June 30, 2015. The decrease in our cash balances from June 30, 2015, was primarily due to the strengthening of the U.S. dollar against our primary functional currencies, repurchase of shares of our common stock, growth in our lending book, provisional tax payments and capital expenditures, offset by the expansion of all of our core businesses.

Excluding the impact of interest received, interest paid under our Korean debt and taxes, the decrease in cash from operating activities resulted from the expansion of our lending book, offset by cash inflows from improved trading activity during fiscal 2016. Capital expenditures for Q2 2016 and 2015 were $9.9 million and $9.1 million, respectively, and have increased primarily due to the acquisition of more payment processing terminals in South Korea and ATMs in South Africa.

Use of Non-GAAP Measures

US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using the non-GAAP measure and provide reconciliation to the directly comparable GAAP measure. The presentation of fundamental net income and fundamental earnings per share and headline earnings per share are non-GAAP measures.

Fundamental net income and fundamental earnings per share

Fundamental net income and earnings per share is GAAP net income and earnings per share adjusted for (1) the amortization of acquisition-related intangible assets (net of deferred taxes), (2) stock-based compensation charges and (3) unusual non-recurring items, including the amortization of KSNET debt facility fees and US government investigations-related and US lawsuit expenses. Management believes that the fundamental net income and earnings per share metric enhances its own evaluation, as well as an investor's understanding, of our financial performance. Attachment B presents the reconciliation between GAAP and fundamental net income and earnings per share.

Headline earnings per share ("HEPS")

The inclusion of HEPS in this press release is a requirement of our listing on the JSE. HEPS basic and diluted is calculated using net income which has been determined based on GAAP. Accordingly, this may differ to the headline earnings per share calculation of other companies listed on the JSE as these companies may report their financial results under a different financial reporting framework, including but not limited to, International Financial Reporting Standards.

HEPS basic and diluted is calculated as GAAP net income adjusted for the profit on sale of property, plant and equipment. Attachment C presents the reconciliation between our net income used to calculate earnings per share basic and diluted and HEPS basic and diluted and the calculation of the denominator for headline diluted earnings per share.

Conference Call

We will host a conference call to review Q2 2016 results on February 5, 2016, at 8:00 Eastern Time. To participate in the call, dial 1-855-481-5362 (US and Canada), 0808-162-4061 (U.K. only) or 0-800-200-648 (South Africa only) ten minutes prior to the start of the call. Callers should request "Net1 call" upon dial-in. The call will also be webcast on the Net1 homepage, www.net1.com. Please click on the webcast link at least ten minutes prior to the call. A webcast of the call will be available for replay on the Net1 website through February 28, 2016.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System ("UEPS") or utilize its proprietary mobile technologies. The Company operates market-leading payment processors in South Africa and the Republic of Korea. Through Transact24, Net1 now offers debit, credit and prepaid processing and issuing services for Visa, MasterCard and ChinaUnionPay in China and other territories across Asia-Pacific, Europe and Africa, and the United States.

UEPS permits the Company to facilitate biometrically secure, real-time electronic transaction processing to unbanked and under-banked populations of developing economies around the world in an online or offline environment. Net1's UEPS/EMV solution is interoperable with global EMV standards that seamlessly enable access to all the UEPS functionality in a traditional EMV environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting and identification.

Net1's mobile technologies include its proprietary mobile payments solution -- MVC, which offers secure mobile-based payments, as well as mobile banking and prepaid value-added services in developed and emerging countries. The Company intends to deploy its varied mobile solutions through its ZAZOO business unit, which is an aggregation of innovative technology companies and is based in the United Kingdom.

Net1 has a primary listing on the NASDAQ and a secondary listing on the Johannesburg Stock Exchange.

Forward-Looking Statements

This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of various factors that cause our actual results, levels of activity, performance or achievements to differ materially from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange Commission. We undertake no obligation to revise any of these statements to reflect future events.

 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
 
    Three months ended   Six months ended
      December 31,     December 31,
      2015     2014     2015     2014
    (In thousands, except per share data)   (In thousands, except per share data)
                         
REVENUE   $ 150,281   $ 154,131   $ 304,754   $ 310,572
                         
EXPENSE                        
                         
  Cost of goods sold, IT processing, servicing and support     78,668     71,774     156,050     146,180
                           
  Selling, general and administration     36,248     41,385     72,009     80,121
                           
  Depreciation and amortization     10,586     10,157     20,701     20,331
                         
OPERATING INCOME     24,779     30,815     55,994     63,940
                         
INTEREST INCOME     3,664     3,587     7,939     7,677
                         
INTEREST EXPENSE     1,054     1,107     2,028     2,419
                         
INCOME BEFORE INCOME TAX EXPENSE     27,389     33,295     61,905     69,198
                         
INCOME TAX EXPENSE     10,593     10,203     21,490     21,851
                         
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS     16,796     23,092     40,415     47,347
                         
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS     388     76     576     168
                         
NET INCOME     17,184     23,168     40,991     47,515
                         
LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST     526     794     1,313     1,052
                         
NET INCOME ATTRIBUTABLE TO NET1   $ 16,658   $ 22,374   $ 39,678   $ 46,463
                         
Net income per share, in United States dollars                        
  Basic earnings attributable to Net1 shareholders     $0.35     $0.48     $0.84     $0.99
  Diluted earnings attributable to Net1 shareholders     $0.35     $0.48     $0.84     $0.99
                         
                         
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
 
    Unaudited   (A)
    December 31,   June 30,
    2015   2015
    (In thousands, except share data)
ASSETS
CURRENT ASSETS                
  Cash and cash equivalents   $ 101,417     $ 117,583  
  Pre-funded social welfare grants receivable     2,503       2,306  
  Accounts receivable, net of allowances of - December: $3,407; June: $1,956     149,005       148,768  
  Finance loans receivable, net of allowances of - December: $4,555; June: $4,227     43,036       40,373  
  Inventory     10,636       12,979  
  Deferred income taxes     4,937       7,298  
    Total current assets before settlement assets     311,534       329,307  
      Settlement assets     321,812       661,916  
        Total current assets     633,346       991,223  
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - December: $95,537; June: $94,014     53,216       52,320  
EQUITY-ACCOUNTED INVESTMENTS     14,626       14,329  
GOODWILL     152,312       166,437  
INTANGIBLE ASSETS, net of accumulated amortization of - December: $83,694; June: $84,668     38,686       47,124  
OTHER LONG-TERM ASSETS, including reinsurance assets     11,286       14,997  
TOTAL ASSETS     903,472       1,286,430  
                 
LIABILITIES  
CURRENT LIABILITIES                
  Accounts payable     13,541       21,453  
  Other payables     43,125       45,595  
  Current portion of long-term borrowings     8,503       8,863  
  Income taxes payable     3,092       6,287  
    Total current liabilities before settlement obligations     68,261       82,198  
      Settlement obligations     321,812       661,916  
        Total current liabilities     390,073       744,114  
DEFERRED INCOME TAXES     8,483       10,564  
LONG-TERM BORROWINGS     50,091       50,762  
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities     1,321       2,205  
  TOTAL LIABILITIES     449,968       807,645  
COMMITMENTS AND CONTINGENCIES                
                 
EQUITY  
  COMMON STOCK                
    Authorized: 200,000,000 with $0.001 par value;                
    Issued and outstanding shares, net of treasury - December: 46,573,489; June: 46,679,565     64       64  
  PREFERRED STOCK                
    Authorized shares: 50,000,000 with $0.001 par value;                
    Issued and outstanding shares, net of treasury: December: -; June: -     -       -  
  ADDITIONAL PAID-IN-CAPITAL     219,416       213,896  
  TREASURY SHARES, AT COST: December: 18,806,441; June: 18,057,228     (225,706 )     (214,520 )
  ACCUMULATED OTHER COMPREHENSIVE LOSS     (199,324 )     (139,181 )
  RETAINED EARNINGS     657,546       617,868  
    TOTAL NET1 EQUITY     451,996       478,127  
    NON-CONTROLLING INTEREST     1,508       658  
      TOTAL EQUITY     453,504       478,785  
                 
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 903,472     $ 1,286,430  
                 
(A) - Derived from audited financial statements                
                 
 
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
                         
    Three months ended   Six months ended
      December 31,     December 31,
      2015     2014     2015     2014
    (In thousands)   (In thousands)
                                 
Cash flows from operating activities                                
Net income   $ 17,184     $ 23,168     $ 40,991     $ 47,515  
Depreciation and amortization     10,586       10,157       20,701       20,331  
Earnings from equity-accounted investments     (388 )     (76 )     (576 )     (168 )
Fair value adjustments     1,567       (234 )     3,000       179  
Interest payable     645       140       1,354       1,299  
Loss (Profit) on disposal of property, plant and equipment     11       (109 )     (84 )     (231 )
Stock-based compensation charge     965       1,035       1,691       1,951  
Facility fee amortized     35       52       69       134  
(Increase) Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable     (13,847 )     (7,315 )     (31,125 )     2,155  
Decrease (Increase) in inventory     776       (622 )     (155 )     (2,745 )
Decrease in accounts payable and other payables     (5,418 )     (1,456 )     (2,046 )     (12,389 )
(Decrease) Increase in taxes payable     (8,859 )     (9,963 )     (1,035 )     (3,352 )
Increase (Decrease) in deferred taxes     789       (168 )     (637 )     (558 )
  Net cash provided by operating activities     4,046       14,609       32,148       54,121  
                                 
Cash flows from investing activities                                
Capital expenditures     (9,947 )     (9,137 )     (20,645 )     (18,515 )
Proceeds from disposal of property, plant and equipment     269       373       617       614  
Proceeds from sale of business     -       -       -       1,895  
Other investing activities     -       (29 )     -       (29 )
Net change in settlement assets     264,404       241,652       242,829       198,598  
  Net cash provided by investing activities     254,726       232,859       222,801       182,563  
                                 
Cash flows from financing activities                                
Acquisition of treasury stock     (11,186 )     -       (11,186 )     (9,151 )
Proceeds from issue of common stock     -       -       3,762       989  
Long-term borrowings utilized     711       1,081       1,431       2,178  
Repayment of long-term borrowings     -       (14,128 )     -       (14,128 )
Sale of equity to non-controlling interest     -       -       -       1,407  
Net change in settlement obligations     (264,404 )     (241,652 )     (242,829 )     (198,598 )
  Net cash used in financing activities     (274,879 )     (254,699 )     (248,822 )     (217,303 )
                                 
Effect of exchange rate changes on cash     (8,086 )     (2,973 )     (22,293 )     (7,072 )
Net (decrease) increase in cash and cash equivalents     (24,193 )     (10,204 )     (16,166 )     12,309  
Cash and cash equivalents - beginning of period     125,610       81,185       117,583       58,672  
Cash and cash equivalents - end of period   $ 101,417     $ 70,981     $ 101,417     $ 70,981  
                                 

Net 1 UEPS Technologies, Inc.

Attachment A

Operating segment revenue, operating income and operating margin:

Three months ended December 31, 2015 and 2014 and September 30, 2015

                     
                Change - actual   Change - constant exchange rate (1)
Key segmental data, in $ '000,   Q2 '16   Q2 '15   Q1 '16   Q2 '16 vs Q2'15   Q2 '16 vs Q1 '16   Q2 '16 vs Q2'15   Q2 '16 vs Q1 '16
Revenue:                                                
South African transaction processing   $ 52,764     $ 58,427     $ 55,639     (10 %)   (5 %)   14 %   3 %
International transaction processing     40,836       40,466       41,229     1 %   (1 %)   27 %   8 %
Financial inclusion and applied technologies     65,686       67,531       67,360     (3 %)   (2 %)   22 %   6 %
  Subtotal: Operating segments     159,286       166,424       164,228     (4 %)   (3 %)   20 %   6 %
  Intersegment eliminations     (9,005 )     (12,293 )     (9,755 )   (27 %)   (8 %)   (8 %)   1 %
    Consolidated revenue   $ 150,281     $ 154,131     $ 154,473     (2 %)   (3 %)   23 %   6 %
                                                 
Operating income (loss):                                                
South African transaction processing   $ 12,080     $ 12,883     $ 13,511     (6 %)   (11 %)   18 %   (3 %)
International transaction processing     4,240       5,743       6,543     (26 %)   (35 %)   (7 %)   (29 %)
Financial inclusion and applied technologies     13,519       17,827       16,554     (24 %)   (18 %)   (5 %)   (11 %)
  Subtotal: Operating segments     29,839       36,453       36,608     (18 %)   (18 %)   3 %   (11 %)
  Corporate/Eliminations     (5,060 )     (5,638 )     (5,393 )   (10 %)   (6 %)   13 %   2 %
    Consolidated operating income   $ 24,779     $ 30,815     $ 31,215     (20 %)   (21 %)   1 %   (14 %)
                                                 
Operating income margin (%)                                                
South African transaction processing     23 %     22 %     24 %                        
International transaction processing     10 %     14 %     16 %                        
Financial inclusion and applied technologies     21 %     26 %     25 %                        
  Consolidated operating margin     16 %     20 %     20 %                        
                                                 
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the second quarter of fiscal 2016 also prevailed during the second quarter of fiscal 2015 and the first quarter of fiscal 2016.  
   

Six months ended December 31, 2015 and 2014

                 
            Change - actual   Change - constant exchange rate (1)
Key segmental data, in '000, except margins   F2016   F2015   F2016  vs  F2015   F2016  vs  F2015
Revenue:                
South African transaction processing   $ 108,403     118,679     (9 %)   12 %
International transaction processing     82,065     83,670     (2 %)   21 %
Financial inclusion and applied technologies     133,046     132,728     0 %   23 %
  Subtotal: Operating segments     323,514     335,077     (3 %)   19 %
  Intersegment eliminations     (18,760 )   (24,505 )   (23 %)   (6 %)
    Consolidated revenue   $ 304,754     310,572     (2 %)   21 %
                           
Operating income:                          
South African transaction processing   $ 25,591     26,522     (4 %)   19 %
International transaction processing     10,783     13,092     (18 %)   1 %
Financial inclusion and applied technologies     30,073     35,434     (15 %)   4 %
  Subtotal: Operating segments     66,447     75,048     (11 %)   9 %
  Corporate/Eliminations     (10,453 )   (11,108 )   (6 %)   16 %
    Consolidated operating income   $ 55,994     63,940     (12 %)   8 %
                           
Operating income margin (%)                          
South African transaction processing     24 %   22 %            
International transaction processing     13 %   16 %            
Financial inclusion and applied technologies     23 %   27 %            
  Overall operating margin     18 %   21 %            
                           
(1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the first half of fiscal 2016 also prevailed during the first half of fiscal 2015.  
   

Net 1 UEPS Technologies, Inc.

Attachment B

Reconciliation of GAAP net income and earnings per share, basic, to fundamental net income and earnings per share, basic:

Three months ended December 31, 2015 and 2014

                 
    Net income (USD'000)   EPS, basic (USD)   Net income (ZAR'000)   EPS,  basic (ZAR)
    2015   2014   2015   2014   2015   2014   2015   2014
                                 
GAAP   16,658   22,374   0.35   0.48   235,204   250,737   5.00   5.39
                                 
Intangible asset amortization, net   1,952   2,930           27,572   32,827        
Stock-based compensation charge   965   1,035           13,625   11,616        
Facility fees for KSNET debt   35   52           494   584        
US government investigations-related and US lawsuit expenses   9   9           127   101        
  Fundamental   19,619   26,400   0.42   0.57   277,022   295,865   5.88   6.36
                                 

Six months ended December 31, 2015 and 2014

                 
    Net income (USD'000)   EPS, basic (USD)   Net income (ZAR'000)   EPS,  basic (ZAR)
    2015   2014   2015   2014   2015   2014   2015   2014
                                 
GAAP   39,678   46,463   0.84   0.99   535,281   509,644   11.39   10.87
                                 
Intangible asset amortization, net   4,460   5,838           60,164   64,036        
Stock-based compensation charge   1,691   1,951           22,813   21,400        
Facility fees for KSNET debt   69   134           931   1,470        
US government investigations-related and US lawsuit expenses   133   136           1,794   1,492        
  Fundamental   46,031   54,522   0.98   1.16   620,983   598,042   13.21   12.76
                                 

Net 1 UEPS Technologies, Inc.

Attachment C

Reconciliation of net income used to calculate earnings per share basic and diluted and headline earnings per share basic and diluted:

Three months ended December 31, 2015 and 2014

         
    2015   2014
         
Net income (USD'000)   16,658     22,374  
Adjustments:            
  Loss (Profit) on sale of property, plant and equipment   11     (109 )
  Tax effects on above   (3 )   31  
             
Net income used to calculate headline earnings (USD'000)   16,666     22,296  
             
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)   47,086     46,519  
             
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)   47,400     46,644  
             
Headline earnings per share:            
  Basic, in USD   0.35     0.48  
  Diluted, in USD   0.35     0.48  
               

Six months ended December 31, 2015 and 2014

         
    2015   2014
         
Net income (USD'000)   39,678     46,463  
Adjustments:            
  Profit on sale of property, plant and equipment   (84 )   (231 )
  Tax effects on above   24     65  
             
Net income used to calculate headline earnings (USD'000)   39,618     46,297  
             
Weighted average number of shares used to calculate net income per share basic earnings and headline earnings per share basic earnings ('000)   47,007     46,873  
             
Weighted average number of shares used to calculate net income per share diluted earnings and headline earnings per share diluted earnings ('000)   47,394     46,990  
             
Headline earnings per share:            
  Basic, in USD   0.84     0.99  
  Diluted, in USD   0.84     0.99  
             

Calculation of the denominator for headline diluted earnings per share

                 
    Q2 '16   Q2 '15   F2016   F2015
                 
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest under GAAP   47,086   46,519   47,007   46,873
  Effect of dilutive securities under GAAP   314   125   387   117
    Denominator for headline diluted earnings per share   47,400   46,644   47,394   46,990
                 

Weighted average number of shares used to calculate headline earnings per share diluted represent the denominator for basic weighted-average common shares outstanding and unvested restricted shares expected to vest plus the effect of dilutive securities under GAAP. We use this number of fully-diluted shares outstanding to calculate headline earnings per share diluted because we do not use the two-class method to calculate headline earnings per share diluted.

Contact Information

  • Investor Relations Contact:
    Dhruv Chopra
    Head of Investor Relations
    Phone: +1 917-767-6722
    Email: dchopra@net1.com